African Continental Free Trade Area: Opportunity for International and African Investors and Traders

Published on 3rd October 2018

The African Fashion and Design Industry has a key role to play in the transformation of Africa’s trade and industrial landscape with the establishment of the African Continental Free Trade Area. This is because it is a potentially catalytic industry for employment creation, wealth generation as well as development of intra-industry trade in African fashion wear.

The African Fashion and Design Industry is also important because it brings up new possibilities for Africa’s integration into global value chains, which is one of the desired outcomes from the establishment of the AfCFTA.

So, where are we on the AfCFTA?

The Assembly of African Union Heads of State and Government adopted on 21st March, 2-018, in Kigali, Rwanda, a number of legal instruments which in totality make up the African Continental Free Trade Area Agreement. These include:

• The Agreement Establishing the African Continental Free Trade Area.

• The Protocol on Trade in Goods.

• The Protocol on Trade in Services

• The Protocol on Rules and Procedures on the Settlement of Disputes;

The AfCFTA Agreement and Protocols also include a number of technical annexes, including the Annexes to the Protocol on Trade in Goods, namely:

• The Schedules of Tariff Concessions (this will be finalized after negotiations on tariff liberalization are concluded);

• The Annexe on Rules of Origin;

• The Annexe on Customs Cooperation and Mutual Administrative Assistance;

• The Annexe on Trade Facilitation;

• The Annexe on Non-Tariff Barriers;

• The Annexe on Technical Barriers to Trade;

• The Annexe on Sanitary and phyto-sanitary Measures;

• The Annexe on Transit; and,

• The Annexe on Trade Remedies.

There are also a number of Annexes to the Protocol on Trade in Services including:

• Schedules of Specific Commitments (This will be finalized after negotiations);

• Most Favoured Nation (MFN) Exemption(s);

• Air Transport Services;

• List of Priority Sectors; and

• A framework document on Regulatory Cooperation.

The Annexes to the Protocol on Rules and Procedures on the Settlement of Disputes include:

• The Working Procedures of the Expert Panel;

• The Rules for the Establishment of Expert Review;

• The Code of Conduct for Arbitrators and Panelists;

Three additional Protocols will shortly be negotiated. These are:

• The Protocol on Investment;

• The Protocol on Competition; and,

• The Protocol on Intellectual Property Rights.

We are working with zeal to bring the AfCFTA into operation. Fourty-four countries signed the Agreement in Kigali, with five additional countries signing during the AU Summit in Nouakchott, Mauritania, bringing the total number of signatures to Forty-nine to-date. In addition, we have seven ratifications, namely Kenya, Ghana, Rwanda, Niger, Eswatini, Chad and Guinea.

We continue to work to secure the minimum number of 22 ratifications. We are confident of obtaining that by December this year. However, our main target is to have all countries ratify so that we create a truly large and integrated market. We are also encouraging the remaining six countries to sign. Three have indicated that they will sign by December this year.

We are also engaged in preparatory activities. These are the following:

• Receipt of offers by member states of Schedules of Tariff Concessions for Trade in Goods and Schedules of Specific Commitments for Trade in Services by December this year for consideration by the AU Assembly in January, 2019;

• Implementation and practical application of the tariff liberalization modality on the designation of Sensitive products and Exclusion lists;

• Implementation and practical application of the Services modality on choice of priority sectors and next steps in Trade in Services. So far, five sectors, namely: business services, financial services, tourism, transport and communication have been agreed upon as the initial set of priority sectors;

• Production of Business Guide to AfCFTA, published in August this year with technical support from the International Trade Centre and production of the AfCFTA Handbook planned for December, 2018;

• Establishment of interim secretariat;

We are also engaged in sensitization and advocacy targeted at key stakeholders such as the African private sector, parliamentarians, the youth and women; among others. We held sensitization with African businesswomen and men in Accra, Abidjan and Dakar. We also had a sensitization meeting with Parliamentarians at the Pan African Parliament in South Africa and civil society in Accra, Ghana.

We co-convened the AfCFTA Youth Forum, in Lusaka, Zambia, in collaboration with the International Trade Centre and we are planning another AfCFTA focused Youth dialogue, later this month in Addis Ababa.

We are collaborating with the International Trade Centre to mount a sensitization meeting on the AfCFTA involving women.

Beyond advocacy and sensitization, we are also offering a platform for exhibitors, buyers and sellers. In collaboration with the African Export Bank and the Arab Republic of Egypt, we are convening the First Intra-African Trade Fair in Cairo, Egypt, from 11-17 December 2018, with targeted trade deals of US$25 billion. The Fair will be held every two years. The host of the 2020 edition will be announced during the Cairo Fair.

So, what is in it for you as fashion manufacturers, retailers and designers in the AfCFTA market? The AfCFTA offers immense business and growth opportunities for African traders and investors. It is a market of 1.27 billion people, projected to rise to 1.7 billion by 2030. The African Middle class is targeted to be 600 million people by 2030 from the current level of 350 million people. The AfCFTA market has an aggregate GDP of US$ 2.1trillion to US$3.4, depending on source of statistics with Aggregate GDP at PPP of US$6.7 trillion.

There is growing online retail, projected to be US$75 billion annually by 2025. Aggregate private and business-to-business consumption is currently US$4 trillion and is also projected to grow.

With 90% tariff liberalization, intra African trade is projected to grow 52.3% by 2022 and double if there is also effective removal of non-tariff barriers. With rapid growth of intra-African trade, we also expect Africa’s share of global trade to progressively rise.

The opportunities for the investors and traders in the AfCFTA market are enormous. Let me outline a select few.

Firstly, we offer you large economies of scale and scope that attract large and long term investments. In this market, you can produce from any African country and supply the entire continent as long as you meet Rules of Origin requirements and other legal provisions. Through integration, the AfCFTA has removed fragmentation of our economies with a vision of creating one African market. The new domestic market in Africa is now the AfCFTA market with a continental brand of “Made in Africa.” In addition, we shall trigger in the Pan African Non-Tariff Barriers Monitoring Mechanism once the AfCFTA Agreement enters into force and this will enhance removal of trade barriers and in the process, promote the efficient conduct of business without borders.

Secondly, we are working on the mainstreaming of informal cross-border trade into formal trade, standing at US$60 billion per annum. Once this is achieved, it will boost intra-industry trade in African fashion wear.

Thirdly, we also offer opportunities for value addition to promote industrialization through the development of regional value chains. This will open up opportunities for trade in intermediate and final goods within the AfCFTA market.

Fourthly, we offer opportunities for innovation and differentiation by African business as they respond to the new competition offered by the AfCFTA market. Fashion designers will play a key role here.

At the Kigali Summit, we held the first ever AfCFTA Business Forum. The Forum was institutionalized thereby offering opportunities for African business to have regular dialogue with African Heads of State and Government as well as B2G networking. Regular participation in the Forum also offers enhanced business opportunities to the private sector through exposure to B2B networking.

Fifthly, the large market offers enhanced opportunities for joint ventures with foreign companies looking for reliable partners in Africa.

This is just a sample of opportunities. Investors and traders are encouraged to move in as soon as the market becomes operational to capitalize on first mover advantage.

The African Fashion and Design industry is well positioned to capitalize and benefit from these opportunities offered by the AfCFTA. In recognition of this, we are working with partners to organize the Presidential Fashion Day this coming January. The Fashion Day will be organized to highlight the potential offered by the African Fashion industry to the growth of this industry, growth of intra-industry trade in African fashion wear as well as employment.

I invite you to mark two entries your respective calendars: participate in the Cairo Trade Fair from 11-17 December 2018 and the Presidents Fashion Day from 28th January to 2nd February, 2019. In this way, you will be strategically positioning yourselves to thrive in the emerging African Fashion and Design Industry.

I am keenly aware you also face challenges in your business dealings across Africa. We will be addressing these. Two of the challenges for your businesses within Africa are infrastructure, especially transport connections and visas. Through the Programme on Infrastructure Development in Africa, we are working to address transport bottlenecks. We have also launched the Single African Air Transport Market to promote increased connections at affordable charges. With respect to visas, some African countries have started issuance of visas to Africans travelling to their countries. Through the Protocol on Free Movement of People, Right of Residence and Right of Establishment opened for signature in January this year, visa free entry will be enhanced in addition to having an African Passport.